Turbulent days expected on the metal markets

by David Fleschen

After their strong rises on Friday, metal prices are taking a breather at the start of the new trading week: they are largely unchanged. On Friday the LME Industrial Metals Index had risen by 1.8%. It was led by nickel and zinc (+3.8% and +2.9% respectively). This was partly due to the weak US dollar. On the other hand, the good market sentiment played a major role, which was probably fed by the hope that the parties in the USA could agree on a new aid program for the US economy in the short term after all. However, another attempt to reach agreement failed at the weekend.

The talks are to continue this week. After the strong appreciation of the Chinese yuan since the end of May, which has boosted metal prices in recent months, the Chinese central bank is now taking countermeasures: as of today it has lifted the reserve requirements for USD purchases on the derivatives market (20%). With this move, it wants to at least slow down the CNY appreciation, which could cause metal prices to lose some support. Tomorrow morning, however, the first Chinese trading data for September will show that China has probably imported large quantities of commodities (albeit smaller than in previous months) - including copper and iron ore - in the past month. Even more exciting will be the virtual autumn meetings of the International Study Groups, which will start this week. The spring meetings were corona-related. In addition to updated estimates for this year, it will be particularly interesting to see how the International Study Groups assess the market situation next year. For 2021, forecasts will be published for the first time.

Source: Commerzbank Research, Photo: Fotolia

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